TMI Blog2010 (7) TMI 768X X X X Extracts X X X X X X X X Extracts X X X X ..... upplied by a DTA unit to a unit located within a Special Economic Zone. The word ‘export’, as defined in Section 2(m)(ii) of the SEZ Act, cannot be interpolated into Section 12(1) of the Customs Act. The Customs Act is a taxing statute and if the said Act does not, by the plain language used therein, carry out the object the Court will not be justified in supplying deficiencies in the Act. The Drawback, under Rule 3 of the Drawback Rules, is subject to the provisions of the Customs Act and the Rules made thereunder. These Rules also specify certain goods which are not entitled for drawback. The Drawback Rules do not relate to levy and collection of customs duty, and it is only for the limited purpose of claiming drawback would taking out of goods from a place in a Domestic Tariff Area to a Special Economic Zone fall within the definition of “export” under Rule 2(c) of the Drawback Rules, absence of any provision for the levy or collection of customs duty on goods supplied from a Domestic Tariff Area to a Special Economic Zone for its authorized operations, either on the D.T.A. supplier or the SEZ unit, the impugned proceedings whereby the SEZ units were called upon to furnish b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TA supplier, or by his authorized representative, for assessment; and, thereafter, the export duty liability had to be discharged by the DTA supplier. 3. The petitioners, in W.P. Nos. 15778/08, 16932/08, 16902/08 and 6025 of 2009, question the proceedings dated 30-6-2008 of the Director, SEZ Section, Ministry of Commerce and Industry, Department of Commerce, Government of India, the Circular dated 9-7-2008 issued by the Development Commissioner, Visakhapatnam SEZ, and the proceedings dated 11-7-2008 issued by the Superintendent of Central Excise, Kottur-I Division, Hyderabad, as illegal and void. 4. The Director, Ministry of Commerce and Industry, Government of India, vide proceedings dated 30-6-2008, informed all Development Commissioners that, in accordance with the suggestion of the Department of Revenue, supply of steel products, on which export duty is still applicable as per the relevant Customs Notification, should be permitted only after payment of the prescribed amount of duty. In the Circular dated 9-7-2008 the Development Commissioner informed all the SEZ Developers and Units that steel products procured by them would be permitted only after payment of the prescribed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 12(1) of the Customs Act, 1962 does not authorize levy of customs duty on supplies made by a DTA Unit to an SEZ unit, both of which are located within India; and the action of the respondents in calling upon DTA units to pay export duty is illegal and without jurisdiction. 8. On the other hand, Sri A. Rajasekhar Reddy, Learned Senior Standing Counsel for Central Excise and Customs, would submit that the Customs Act is not one of the Acts specified in the First Schedule to the SEZ Act; while Section 26(c) (d) of the SEZ Act exempt goods brought from a Domestic Tariff Area to a Special Economic Zone from payment of excise duty, and makes available to a SEZ unit the drawbacks admissible on goods brought from a Domestic Tariff Area to a Special Economic Zone, it does not exempt either the SEZ unit or the DTA unit from payment of export or import duty under the Customs Act; as Section 2(m)(ii) of the SEZ Act defines export to mean supply of goods from a Domestic Tariff Area to a SEZ unit, the DTA unit is liable to pay export duty; full effect should be given to the legal fiction in Section 53 as Section 51 gives overriding effect to the SEZ Act over other laws; giving effect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fastened on a particular subject. The subject is not to be taxed without clear words for that purpose; and every Act of Parliament must be read according to its natural construction of words. [A.P. Board for Water Pollution Control v. A.P. Rayons Ltd., (1989) 1 SCC 44; Re Nicklethwait - (1855) 11Exch 452; Tennant v. Smith - (1892) AC 150; St. Aubyn v. A.G. - (1951) 2 All ER 473]. Words must say what they mean, nothing should be presumed or implied, they must say so. The true test must always be the language used. [Goodyear India Ltd. v. State of Haryana - (1990) 2 SCC 71]. You read nothing in, you imply nothing, but you look fairly at what is said and at what is said clearly and that is the tax. [Sutlej Cotton Mills Ltd. v. CIT - 1992 Supp (1) SCC 50; CED v. Kantilal Trikamlal - (1976) 4 SCC 643]. If a case is not covered within the four corners of the provisions of a taxing statute, no tax can be imposed by inference or by analogy or by trying to probe into the intention of the legislature. [Gursahai Saigal v. CIT - (1963) 48 ITR (S.C.) 1; A.V. Fernandez v. State of Kerala - 1957 SCR 837]. If the subject cannot be brought within the letter of the law the subject is free, however ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wati Sugar Mills v. Haryana State Board - (1992) 1 SCC 418]. 14. The SEZ Act is an Act to provide for the establishment, development and management of Special Economic Zones for the promotion of exports and for matters connected therewith or incidental thereto. Section 2(c) of the SEZ Act defines authorised operations to mean operations which may be authorized under Section 4(2) or 15(9) of the said Act. Section 2(g) defines developer to mean a person who has been granted, by the Central Government, a letter of approval under Section 3(10). Section 2(i) defines domestic tariff area to mean the whole of India including the territorial waters and continental shelf but not to include the areas of the Special Economic Zones. Section 2(j) defines entrepreneur to mean a person who has been granted a letter of approval by the Development Commissioner under Section 15(9). Section 2(zc) defines unit to mean a unit set up by an entrepreneur in a Special Economic Zone. Section 3 of the SEZ Act prescribes the procedure for making a proposal to establish Special Economic Zones and, under sub-section (10) thereof, the Central Government shall, on receipt of communication under sub-se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompetence of the Parliament. [In Re, Sea Customs Act, 1878, Special Reference No. 1 of 1962 - AIR 1963 SC 1760; Essar Steel Limited, 2010 (249) E.L.T. 3 (Guj.)]. 16. A conjoint reading of Section 12(1) with Sections 2(18), 2(23) and 2(27) of the Customs Act, 1962 makes it clear that customs duty can be levied only on goods imported into or exported beyond the territorial waters of India. Since both the SEZ unit and the DTA unit are located within the territorial waters of India, Section 12(1) of the Customs Act 1962 (which is the charging section for levy of customs duty) is not attracted for supplies made by a DTA unit to a unit located within the Special Economic Zone. 17. Section 7 of the SEZ Act relates to exemption from taxes, duties or cess and, thereunder, any goods exported out of, or imported into, or procured from the domestic tariff area by (i) a unit in a Special Economic Zone; and (ii) a developer; shall, subject to such terms, conditions and limitations as may be prescribed, be exempt from payment of taxes, duties or cess under all the enactments specified in the first schedule to the SEZ Act. The first schedule to the SEZ Act gives a list of associated enactments ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thorised operations by the Developer or entrepreneur. (2) The Central Government may prescribe the manner in which, and the terms and conditions subject to which, the exemptions, concessions, drawback or other benefits shall be granted to the Developer or entrepreneur under sub-sec. (1). 18. The mere fact that the Customs Act, 1962 is not one of the Acts specified in the First Schedule to the SEZ Act does not necessitate the conclusion that export duty is payable by a DTA supplier on the goods supplied by it to a unit located within the Special Economic Zone. In the absence of a charging provision in the SEZ Act providing for the levy of customs duty on such goods, export duty cannot be levied on the DTA supplier by implication. The exemptions in clauses (a) to (g) of Section 26(1) are provided for, as the goods in question would otherwise have been subjected to levy of taxes and duties under the enactments mentioned therein. For instance, but for the exemption under Section 26(1)(b) of the SEZ Act, goods exported by a unit in an SEZ to any outside India would have been subjected to levy on customs duty under Section 12(1) of the Customs Act. Likewise, but for the exemption und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cause in some Act, which is not incorporated or referred to, such an interpretation is given to it for the purposes of that Act alone. [Union of India v. R.C. Jain - AIR 1981 SC 951; Parvatibai v. Maharashtra Revenue Tribunal - AIR 1995 Bombay 19; Craies on Statute Law, Sixth Edn., at p. 164]. A definition clause is a small dictionary. The meaning which it gives to the words is always subject to context. [Sunkara Laxmana Rao v. Dasam China Papaiah Raju - AIR 1980 Andhra Pradesh 191]. It is always unsatisfactory and generally unsafe to seek the meaning of words used in an Act of Parliament in the definition clauses of other statutes dealing with matters more or less cognate, even when enacted by the same legislature. [Laurence Arthur Adamson v. Melbourne and Metropolitan Board of Works - AIR 1929 Priviy Council 181; MSCO. (P) Ltd. v. Union of India - (1985) 1 SCC 51 = 1985 (19) E.L.T. 15 (S.C.); Khazan Singh v. The President of India - AIR 1968 Punjab Haryana 478]. 22. Unlike Section 2(zd) of the SEZ Act, whereunder all other words and expressions used and not defined in the SEZ Act but defined in the Central Excise Act 1944, the Industries (Development and Regulation) Act, 1951 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this behalf. 76H Goods utilised within a special economic zone. (1) The Central Government may make rules in this behalf to enumerate the cases in which goods to be utilised inside a special economic zone may be admitted free of duties of customs and lay down the requirements which shall be fulfilled. (2) Goods utilised contrary to the provisions of rules made under sub-section (1) shall be chargeable to duties of customs in the same manner as provided under clause (b) of Section 76-F as if they have been removed for home consumption. 24. Chapter X-A, in its entirety, was repealed by Finance Act, 2007 (Act 22 of 2007) with effect from 11-5-2007. 25. Prior to its repeal by Act 22/07, Section 76F(a) provided for levy of export duty on goods brought into a Special Economic Zone from a DTA, and Section 76F(b) provided for levy of customs duty including anti-dumping, countervailing and safeguard duties on goods removed from a Special Economic Zone for home consumption as if the said goods are being imported. After its repeal by Act 22/07 neither the Customs Act, 1962 nor the SEZ Act, 2005 provide for the levy of customs duty on goods admitted into a Special Economic Zone from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1) of the SEZ Act, cannot be equated to the territory of India. This term has been defined in the General Agreement of Tariffs Trade, to which India is a signatory, to mean an area subject to common tariff and regulations of commerce; and there could be more than one customs territory in a country. The contention that Section 53(1) requires an SEZ to be deemed to be a territory outside India, if accepted, would lead to a situation where a Special Economic Zone would not be subject to any Indian laws. The entire SEZ Act, 2005 would be rendered redundant since it is stated to extend to the whole of India. In any case, various provisions of the SEZ Act would be rendered redundant and unworkable if the Special Economic Zone was to be considered an area outside India. This is apart from the fact that such a declaration would be constitutionally impermissible. [Essar Steel Limited - 2010 (249) E.L.T. 3 (Guj.)]. 28. Section 51(1) contains a non-obstante clause and, in case of inconsistency between the provisions of the SEZ Act and any other law in force, the provisions of the SEZ Act shall prevail. It should first be ascertained what the enacting part of the Section provides on a fair ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Customs Act relates to clearance of goods for home consumption and, under sub-section (1) thereof, where the proper officer is satisfied that any goods entered for home consumption are not prohibited goods, and the importer has paid the import duty, if any, assessed thereon and any charges payable under the Act in respect of the same, the proper officer may make an order permitting clearance of the goods for home consumption. 31. Chapter II of the SEZ Rules prescribes the procedure for establishment of a Special Economic Zone. Rule 12 relates to import and procurement of goods by the developer. Under sub-rule (1) thereof, the developer may import or procure goods from the Domestic Tariff Area without payment of duty, taxes and cess for the authorized operations subject to the provisions contained in sub-rules (2) to (8). Rule 12(2) requires the Developer to make an application to the Development Commissioner along with the list of goods including machinery, equipment and construction materials required for the authorized operations. Sub-rule (6) requires the developer to maintain a proper account of the import or procurement, consumption and utilization of goods and submit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... E-1, with the endorsement of the authorized officer that the goods have been admitted in full in a Special Economic Zone, shall be treated as proof of export. Rule 34 relates to utilization of goods and, thereunder, goods admitted into a Special Economic Zone shall be used by the Unit or the Developer only for carrying out authorized operations. If the goods admitted are utilized for purposes other than for the authorized operations, duty shall be chargeable on such goods as if it had been cleared for home consumption. Under Rule 35, the Unit shall account for the entire quantity of goods imported or procured duty free, by way of export, sales or supplies in a Domestic Tariff Area. 33. Rule 47 relates to sales in a Domestic Tariff Area. Such sales are liable for payment of customs duty under Section 30 of the Act. Section 30 relates to domestic clearance by Units and, thereunder, subject to the conditions specified in the rules made by the Central Government in this behalf, (a) any goods removed from a Special Economic Zone to the Domestic Tariff Area shall be chargeable to duties of customs including anti-dumping, countervailing and safeguard duties under the Customs Tariff Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X
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